Pearson to sell assets after loss

P earson

Plc earned a brief respite from the turmoil in its business yesterday after the education services giant reported no further deterioration in its trading and said it would cut costs further and sell some assets.

Pearson, which has issued five profit warnings in four years after students in the United States started renting text books rather than buying them, saw its shares rise after it showed its balance sheet was holding up better than feared.

The group posted a £2.6 billion ($3.26 billion) pre-tax loss due to historical problems at its higher education business but its 2016 adjusted operating profit, debt and cash flow all came in slightly better than expected.

It said it would take further actions to make the company more efficient and continue would “realign” its cost base with its markets.

“Our priorities for 2017 are clear,” said chief executive John Fallon. “We will continue to accelerate our digital transformation, simplify our portfolio, control our costs, and focus our investment on the biggest growth opportunities in education.”

Employing 35,000 people, Pearson provides everything from textbooks to school testing, college courses and online degrees, with Britain, the United States, South Africa, Brazil and China its most important markets.

In recent years it has been hit by sharp changes in its US higher education business and volatility in its emerging markets.

Pearson said it planned to sell its English language learning business GEDU and was looking for a partner to invest in its Wall Street English (WSE) unit. It has already announced a plan to sell its 47% stake in the Penguin Random House joint venture.

Underlying operating profits last year fell 21% to £635 million, slightly better than expected by analysts, due to tight cost control. Net debt increased to £1.1 billion, from £654 million the year before, but its operating cash flow jumped.

“Expect relief on lower debt, disposals and cost saves,” analysts said.